Skilled Nursing Investors See Stark State-by-State Cost Differences

By Maggie Flynn | June 17, 2018

Long-term health care is an inherently local service, and in that context, it’s not surprising that the cost of investing in a skilled nursing facility — as measured on a per-bed price basis — varies wildly from state to state and region by region.

But another factor is timing, according to Ben and Brandon Bohland, brothers and co-founders of Bed License Exchange, a marketplace that lets investors and operators buy and sell health care bed licenses. The majority of the exchange’s buyers are seeking open a new facility or some other kind of novel development.

“We’re very, very hesitant to give general numbers even at a state level,” Brandon told Skilled Nursing News. “There are states where beds can trade for $2,000 a bed in one part, and then you go to another part of the state and they can trade for $25,000, $30,000 a bed. That’s all based on timing, too.”

The variation is highlighted by data from the National Investment Center for Seniors Housing & Care (NIC) on the average majority nursing care price per unit (PPU) by region.

The average PPU in the Northeast in 2013, for instance, was $58,778.28. In 2014 and 2015, the Northeast PPU was $67,398.15 and $69,287.65, respectively.

The PPU jumped in 2016, however, rising to $107,658.56, before sinking back to the $67,000 level in 2017. This year, it’s back up, at least as of May 24, to $101,673.66.

One thing that both brothers stressed was the need to distinguish between the price of a bed license and the price per bed in a deal that includes the real estate. The NIC MAP data draws from data from senior housing and care properties, so those prices include the real estate, as opposed to measuring the price of a bed license alone.

That distinction is important, because of how quickly regulations in states can affect supply and demand. Florida, for instance, had a proposal to repeal its certificate of need (CON) process recently that could have dramatically changed the cost of getting a bed license in that state — but only the cost of a getting a bed license, both Bohlands stressed.

“You can’t compare that [price] to a bed license with a real estate transfer … because of the rules and regulations in a lot of these states and how beds can move and when and things like that,” Brandon said.

Supply and demand is often a major factor in pricing per bed, as might be expected, both Bohlands told SNN. But that plays out differently depending on the state and even on the areas within the state. Florida, for instance, has some notable hot spots such as Collier County — located in the southwestern part of the state, south of Fort Myers — Ben told SNN. But the Sunshine State doesn’t even make Bed License Exchange’s top three states with the highest price per bed license.

“The hottest state by far is North Carolina,” Brandon told SNN. “We worked for over two and a half years to find several operators just individual bed licenses, and the buyers were using them for new construction or in addition to an existing facility, but they just couldn’t find the actual license. They would have to acquire the real estate to acquire the licenses and then shut the building down. That’s still the case in North Carolina; it’s still very difficult to inventory there.”

The other two top states in terms of license price are Utah — which despite not being a CON state, does have a moratorium on Medicaid beds — and West Virginia. While Utah isn’t as surprising, as the states with some kind of moratorium tend to have higher costs, West Virginia makes the top three for prices because of how well the state pays for skilled nursing.

“The folks that we’ve talked to are hospital operatorswith skilled nursing attached, and they say skilled nursing is saving their hospitals because of the reimbursement,” Ben told SNN.

The three states that tend to have a lower price per bed than others are Washington, Oregon, and Nebraska, Brandon told SNN in an e-mail. These states all have low demand and low transaction volumes.

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